Sony weighing up options if smartphones are unprofitable next year

by: Robert TriggsOctober 7, 2015

sony xperia z5 compact first look aa (12 of 12)

Whether you’re a big Sony fan or unimpressed by its latest batch of smartphones, the past couple of years have been tough for the company’s mobile division, with dwindling revenues and an unimpressive share of the global market. 2016 looks to be the make or break year for Sony’s smartphones, as Chief Executive Kazuo Hirai suggests that Sony may begin looking at “alternative options” for the division if it doesn’t look like breaking even.

The company has given itself an ultimatum to try to return its mobile business to break even following 2016, before considering the fate of its Xperia brand. We don’t know exactly what the alternative options could be, but exiting the smartphone market altogether hasn’t been ruled out. Hirai has already presided over a number of important cost cutting measures at Sony, including the decision to axe the struggling PC business.

“We will continue with the business as long as we are on track with the scenario of breaking even next year onwards … Otherwise, we haven’t eliminated the consideration of alternative options.” – Sony Chief Executive Kazuo Hirai

Despite cost cutting measures and a number of restructuring efforts, Sony’s mobile arm is expected to post a 60 billion yen ($480 million) loss this year. Substantially higher than the 39 billion yen ($310 million) that it anticipated it would lose back in April. This makes it seem quite unlikely that Sony will be able to turn the division back to a profit in such a short space of time. Xperia smartphones make up less than 1 percent of shipments in the US and just 17.5 percent in its home nation of Japan.

Although Sony has continually made improvements to its high-end Xperia Z range of smartphones, some have argued that the similarities between generations have sapped broader consumer enthusiasm and interest for the range. Sony has been trying to build a portfolio for the growing mid-range markets, but price pressure from inexpensive Chinese brands continues to make this segment tougher to profit from.

Sony's latest Xperia flagships:

This isn’t the only company reshuffle on Sony’s plate at the moment. The electronics giant also recently announced that it is looking to give more independent control to its highly profitable image sensor business, in order to keep it competitive with the likes of Samsung and Omnivision.

2016 is going to be a crucial year for the Xperia range. Do you think that the Android space would be worse off without Sony in it?

  • Thomas

    Well if they would sell in the US they could take my money…

    • neonix

      Yeah… I feel like they are taking the completely backwards approach to the US.

      The Xperia phones haven’t been popular here, so they just stop selling them and stop trying altogether… when all they really have to do is take advantage of this revolutionary new concept I hear people call “advertising”.

    • Mark

      The American press hate Sony. It’s better not to sell there. What’s hilarious, Americans are only just discovering what amazing phones Sony make, and they have been lied to by the press and Sony hate circus.

      • Potato

        Does it has to do something with SONY being a Japanese company?

      • Btort

        I’m pretty sure the PS4 is being sold much better than the XB1 for the past year or so

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  • WorldStarrrrr

    Less than 1% share in the US..Makes no sense even coming here. In their homeland its 17%. Kaz i believe understands that this is the final nail in the coffin. Cheap Chinese products, Apple and the strong Global presence of Samsung..They are doing the right thing and getting out of this space.

  • Johan

    Eh… Okey?

    Then what about the article on Android Authority from just a few months ago (July 7, 2015)?

    ‘Sony mobile CEO: “We will never ever sell or exit from the current mobile business”‘

    This is highly contradictory…
    Has something been misinterpreted or is Sony just being extremely ambivalent?

    • retrospooty

      What I think is funny is the “if smartphones are unprofitable next year” part. Well, Sony hasn’t been making money. They do make some good phones, but have next to zero penetration in the most lucrative market in the world (the USA). They seem to make little to no effort to change that. Why would you suddenly make more money when you are doing the same exact thing you did for the past several years that isn’t working? FFS try something,

      • Svnjay

        The US is not the most lucrative market, far from it.

        • Karly Johnston

          More flagships are sold in the US than any other country… or region for that matter.

          • Svnjay

            Two things:

            1. US consumers only care about Samsung and Apple

            2. More midrange phones are sold in China than any other region and China is the most lucrative market. The demand for highnend smartphones in the US is lower than that of midrange phones in China.

          • Karly Johnston

            The profit margins for flagships are 5-10X those of mid-range phones easily offsetting any unit sales gap.

          • Svnjay

            That is with the assumption that the midrange and highness phones sold just as well but the Chinese market is much larger than the US market, it’s actually the largest smartphone market. 1/3 of smartphone shipments go to China alone.

          • Karly Johnston

            It doesn’t matter when they don’t make a profit.

    • bruce

      I also remember reading an article that Sony was pulling out from U.S. smartphone market last year.

      • neonix

        And they apparently have, as evidenced by the complete lack of any announced ways to buy a Z5 in the US.

        It’s actually turned my opinion on them a bit. I had felt worried and bad for them because I like their phones a lot, but now I’m somewhat angry as a consumer. If I want a new Xperia, I’d have to spend about a thousand dollars to import one!

        The least they could do is send a limited number of devices to Amazon to sell through Prime for their US fans who want to give them money. And they could easily email all the people who bought a phone from their online store in the past. So dumb on Sony’s part.

      • Svnjay

        They were never in the US smartphone market.

  • ttwiitch yu

    Well, maybe if they launched finally in the US, they would be profitable!

  • jpswain

    Sony, listen carefully, get out of the cellphone business, and start specializing in extremely high-end devices of which you were famous for in the past. Specifically, a pocket computer with desktop specs.
    I won’t buy another “$Grand$ Apple”. That is $1000 phones with “dog and pony” tricks.

    Produce a “device” that has 6 gigs ram, 256 UFS HD, 2k screen, USB type “C” interface, Bluetooth keyboard, screen mirroring to 4k TV, dual OS, that is hot-swappable from Android 6.0 to MS Windows 10. I want to drag and drop a photo out of Android into a a Windows PowerPoint or Word Doc with a smart stylus that acts as a mouse. A removable battery, the device has to be durable not pretty.
    A 4G or 5G Lte with accelerometer, capable of tracking and navigating a drone over cellular Lte. I’d be willing to pay $1000 or more for that, but I’m not going to pay $1000 or another phone. If I need a phone, I can buy 4G Lte for $99 and throw it away once a year.
    Get out of the low and medium phone market, you’ll go broke against the Chinese phones.

    • bruce

      $1000 won’t be able to buy you that kind of device. 2k maybe.
      It sounds more like you want Sony to close down the smartphone business.

    • David Onter


    • mobilemann

      you have no idea what an arm device is even capable of, but you are sure you want a $3000 pocket machine with 6gb of ram.

      What would you do with it, besides games and porn?

  • Debabrata Ghosh

    The reason sony is not able to drive profit from their mobile division is because they make some of the astounding mobiles, great specs and design but with a hefty price. Look at Moto G (3rd generation) which sells at INR 12999 while to buy xperia m4 you have to pay INR 19000 or more with same specifications. They have to target ES/Europe with Z5 premium phones but for markets like india it ought to be specs with affordable price the way lenevo, xiaomi, motorola, huawei & others are doing.

    • Kamalnath

      not only the price, sony phones tend to breakdowns more than sumsung or apple. still they charge very premium for them.
      why don’t they provide good quality stuff if they decide to charge premium price?

  • Ornitonick

    They should stop pulling new flagships every monday and adopt vanila Android with only little exclusive apps, like camera. And reduce the prices!

    They have great phones, but people get really upset when invest some money in one phone and in few months his phone is not The One for OEM. This mean it is not the first in line for updates and no one produces cases and accessories for the model. The resale price drops like hell!

  • Jimbo

    If they pull out of smartphones, they’ll essentially just become a camera equipment and audio equipment company, a movie studio (that they’re also thinking of selling), and a Japan-localized insurance/financial services firm.
    How the mighty have fallen indeed.

    • dannybuoy

      PS4, cough cough, fastest selling console, even faster than PS2, cough

    • Svnjay

      Sony makes over 40% of cameras in smartphones…

    • Ali

      Sony LCDs, LEDs and other mobile displays ???

  • Odysseas Papageorgiou

    I certainly believe that the Android space would be much worse off without Sony, since Sony is one of the very few mobile phone manufacturers which offer true high end smartphones without any compromises. This becomes evident when comparing the screens of the Sony smartphones with the ones from other manufacturers. By using standard RGB subpixel layout in all of its screens, Sony ensures that the stated resolution of a screen, it is also its actual resolution. On the contrary, other manufacturers, namely Samsung who happens to own more than 96% of the Super Amoled screen market, with which it supplies other manufacturers, makes use of pen tile matrix screens on a subpixel level, meaning that the actual resolution of the screen is around 30% to 50% less than that of the stated resolution. This does not only create a less sharp display in comparison to a standard RGB subpixel layout but also affects negatively the battery, since the number of pixels that have to move on the display remain the same but they are not just sharp enough, since they only use two sub-pixels (Red & Green) instead of three (Red, Green & Blue), while at the same time they share the blue pixels with the other pixels that surrounds them. Most Super Amoled screens from Samsung display a diamond pattern on a subpixel layout which make use of what is described above. In addition, Sony was one of the first Android manufacturers of using luxury materials (glass & aluminum) in the construction of its mobile phones while at the same time the design of its smartphones was very elegant. On the contrary, manufacturers such as Samsung, were using plastic in their flagship smartphones while their design was nothing special for years. Furthermore, Sony was one the first manufacturers to produce phones which could withstand water (IPxx) certification. Finally, Sony always equipped their smartphones with card slots, despite the fact that at the same time they were water resistant. Last but not least, it would be unfair not to mention the fact that Sony always had an excellent record of updating the software on their smartphones both on time and over time, especially in comparison to other manufacturers. For all the reasons above, I believe that both the smartphone industry and the consumers will lose if Sony finally decides to exit the smartphone market.

    • Mark

      They are also by far the biggest contributor to AOSP than any other company (aside Google).

      They will also surely stop that too.

      Congratulations to anyone that got fooled by idiots like David Ruddock

      • Svnjay

        David Ruddock is one of the biggest Sony haters. He shouldn’t review any Sony devices for AP as his bias is clear as day.

  • daftrok

    How about this: Instead of wasting time building a custom OS, release them on the Google Play Store with Vanilla Android and include all the LTE/CDMA/GSM bands in a SINGLE model. That way it can sell globally easily without having to waste money on R&D. And because Google Camera SUUUUUUUUUUCKS, release a user app Sony Camera for your camera. Done.

    • Svnjay

      That’s horrible advice, don’t become the CEO of an Android company.

  • Ernest Asare

    Imo sony has become lazy. Period! Even successful brands try hard to stay up there by giving customers what they want. I have used sony since T610 era, their phones have always packed the features I want but the software almost always felt unfinished. Hire some damn good YOUNGER software guys, too many old fashioned people there!

  • billcollier

    Sony finally has a phone that offers advantages to the full spectrum of most every buyer’s needs and they hesitate? It’s either what is the matter with your thinking? Or Sony is playing mind games with the consumer.
    Every single phone released this year has let down or snubbed their faithful buyers in one way or another. As an x Samsung and Nexus customer I’m waiting for the Z5, come on already.

  • Cakefish

    Z5 Compact is amazing. Long live Sony.

  • zp

    Bad marketing and very low design adjustments means failed strategy. It’s that simple. Look to LG for inspiration, Sony.

  • Julian Andres Klode

    Well, there’s always the option of spinning Xperia out into its own company.

  • Kamalnath

    I don’t know about other countries but here (in indian sub continent) sony phones are low quality ones.
    I don’t mind paying premium amount for a good quality phone. not the crab sony’s trying to sell us….

  • Karly Johnston

    Let’s start taking bets who goes outta business first… HTC or Xperia?

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  • Danny Evans

    If they would support CDMA, they would likely gain a good deal of users in the US like myself who are tired of Samsung scaling down their phones to be like iPhones. I would love to be able to use an Xperia Z5. The morons won’t support my network though.